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How to Read an ICPO

What a purchase order must contain before it means anything, and the clauses that quietly make it unworkable.

What it is, and what it is not

An Irrevocable Corporate Purchase Order is a buyer stating formally what they want to buy and on what terms. Despite the word "irrevocable", it is not a contract and it binds nobody. Its value is that a buyer willing to put their requirement in writing on letterhead is more serious than one who will not.

What it must contain

An ICPO missing any of these is not yet workable. A seller will not commit product against a document that leaves the essential terms open.

  • Product and specification, by standard where one exists — EN 590, ISO 8217, ASTM D1655. A trade name alone is not a specification.
  • Quantity, with tolerance. "25,000 MT ±5%" is a quantity; "25,000 MT" without tolerance will be disputed at the loadport.
  • Delivery basis and named destination. FOB, CIF and CFR each move the cost and risk to a different party.
  • Loading or delivery window. A laycan or a stated number of days from contract.
  • Payment instrument, named precisely. "L/C" is not enough — documentary or standby, at sight or usance, and issued by which class of bank.
  • Inspection arrangement. Who appoints, who pays, and whether load or discharge figures govern.
  • Validity period. An ICPO with no expiry is one the buyer can walk away from and one the seller cannot rely on.
  • Signature of someone with authority to bind the company, with their position stated.

Clauses that quietly make it unworkable

These appear in circulated templates and are frequently copied by buyers who have not read them. Each one is a reason a seller will decline, and none of them looks like a problem at first glance.

Payment "after discharge and inspection at destination" — The seller ships a cargo and is paid only once it has arrived and the buyer is satisfied. No seller finances a cargo on that basis, and a buyer proposing it is telling you they cannot open an instrument.
A demand for POP before any instrument is issued — Proof of product is commercially sensitive — it names the terminal and often the supplier. Asking for it before showing any financial capability inverts the normal order and is the most common shape of an information-gathering approach.
Price stated as a fixed discount to a benchmark, with no cap — A discount that made sense at one price level is a loss at another. Without a floor or a review clause, a seller is exposed to a move they cannot hedge.
"Subject to seller's acceptance of buyer's procedure" — This appears to be a courtesy and is in fact a reservation of the right to change the terms later. Two parties can each hold this clause and neither is committed to anything.
Signature block with no name, position or company stamp — An unsigned or anonymously signed order is not evidence of anything and cannot be relied on if the buyer later denies having made it.

The order things happen in

Most failed transactions in this market are not fraud. They are two parties each waiting for the other to move first, until the window closes. The conventional sequence exists because it balances that risk.

  1. Buyer issues the ICPO Costs the buyer nothing but a signature, and gives the seller something specific to price.
  2. Seller responds with a soft offer Confirms availability and price on the stated terms. Still not binding.
  3. Terms are agreed and a contract is drafted This is the first point at which either side is committed.
  4. Buyer opens the payment instrument Costs the buyer real money and is the strongest signal of capability available.
  5. Seller provides proof of product Against a live instrument, the commercial sensitivity is acceptable.
  6. Inspection is nominated and loading proceeds Independent figures govern the payment.
These guides describe common market practice. They are not legal advice, and market practice varies by jurisdiction, product and counterparty. Where a transaction turns on a point of law, take advice from a qualified professional in the governing jurisdiction.

Glossary

Definitions for the terms used across these guides.

Glossary